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3/25/2013

Grand Old Opportunity

As they seek to revive their political fortunes in the wake of last year’s disastrous election, Republicans risk a dangerous misunderstanding: Since Democrats did well last November and Republicans generally didn’t, some on the right have concluded that the Democrats must be onto some secret formula for success in an altered political environment, and that the task for Republicans is to find elements of their opponents’ agenda or style they can comfortably co-opt or uncomfortably accept.

There is precedent for such a response to political troubles. In the late 1980s, a group of centrist Democrats concluded that their party had to adopt the essentials of Ronald Reagan’s economic vision if it was to appeal to voters again, and their efforts ultimately bore fruit with Bill Clinton’s election.

But the analogy to that era understates both the challenge the GOP now faces and the opportunity it confronts. The fact is that the public is not much happier with the Democrats than with the Republicans, and that neither party has offered a compelling policy agenda for addressing America’s challenges in this era of stagnation and uncertainty.

The president’s approval rating now hovers around the share of the vote that Mitt Romney won in November, and congressional Democrats receive approval ratings in the low 30s. It would be odd to look to a party the public barely tolerates for guidance on how to appeal to voters. And the 2012 campaign offers cautionary lessons but few constructive insights. The president effectively combined cynical attacks on his opponent’s character with microtargeted pandering to various slivers of the population, but he offered no agenda for addressing the public’s deep concerns. The Republicans, meanwhile, sought to benefit from his failure to allay those concerns, but they did not offer their own path to allaying them.

There is no model to look to: Both parties give the impression of having outlived their eras. The moment feels more like the late 1970s than the late 1980s. And if Republicans are to regain their balance and lead the country again, they will have to develop an agenda for national renewal that speaks to today’s policy challenges and to the sources of voters’ anxieties.

At the heart of those anxieties is a sense that America’s economic promise—the promise of growth-fueled upward mobility backed with security against the gravest misfortunes and risks—is waning. Economic growth has slowed dramatically—it averaged 3.6 percent annually from 1950 through 2000 but only 1.6 percent since then. And the cost of living in the middle class has been rising without a comparable improvement in living standards, especially because health care and higher education have gotten much more expensive without getting much better.

The key reasons for this are not income inequality or high marginal tax rates. They basically come down to the inefficiency of our economy. Growth is a function of an expanding labor force and increasing productivity. For much of the postwar era, our economy had both in droves—as women and the baby boomers flooded the workforce and a series of technology-driven efficiency explosions boosted output.

In the coming years, our labor force will not be growing as it did. The baby boomers are retiring, women are fully in the workforce, and a lack of the requisite skills leaves many Americans (and many immigrants) unsuited to the jobs our economy offers. Growth will therefore require solid, steady productivity improvements.

But our economy is profoundly ill-suited to enable them. Our government finances are in shambles, our public sector is woefully inefficient, our private sector is undermined by a set of policies and institutions that seem intent on denying us a productive future workforce and by a regulatory mindset that prefers consolidation to growth. Our middle class (which in America really means the more than 80 percent of people who tell pollsters they are neither rich nor poor) is beset by rising costs and stagnant pay. And among the poor, a catastrophic collapse of family and social institutions makes it increasingly difficult to equip the next generation to rise.

The government can’t solve all this, but there is much it can do because a lot of the problem is caused by bad public policy. The sectors of the private economy most dominated by government—education and health care—are burdened by outdated institutions and irrational economic arrangements. Modernizing both (by breaking union monopolies, deflating the higher-education bubble, and using competition to drive higher-value health care and reduce entitlement costs) would help train tomorrow’s workers and avoid crushing them with both public and private debt, and it would help save the safety net for the vulnerable from fiscal collapse. Meanwhile, the sector with the most potential for fueling a near-term boom—energy—is being held back by an administration uncomfortable with newly discovered domestic fossil-fuel reserves.

Reforms in other key areas are also badly needed. A simpler, leaner tax code would reduce the government’s drag on the economy and could allow us to focus tax relief on lower-middle-class families struggling under the payroll tax. Monetary policy focused on steady nominal growth could power a real recovery. And reinforcing the work of civil-society institutions to strengthen families and communities could help restrain the disastrous social trends that undermine mobility and hold back the poor.

The political and economic appeal of lower health care, education, energy, and tax bills should be obvious, and the moral force of saving the safety net and combating the collapse of poor families and communities is plain. Yet amazingly, neither party has seriously offered such an agenda.

The Democrats have an excuse: Their electoral coalition makes it impossible for them to offer that agenda. Progressives are committed to every jot and tittle of today’s broken welfare state, environmentalists are allergic to oil and gas, teachers’ unions oppose meaningful K-12 reform, the professors would never put up with a new business model for higher education, public employees will resist every effort to modernize government services, and cultural liberals see a moral awakening as a recipe for repression. Far from owning the future, Democrats are helplessly stuck in the past. There is a reason why the president ran on no agenda and why Democrats now offer only blind reaction.

Republicans have no such excuse except inertia. In fact, a growth agenda geared to reviving upward mobility and offering relief to middle-class families would be a perfect marriage of conservative principles and Republican political objectives. It would powerfully appeal to demographic categories the Democrats imagine they own while uniting core Republican constituencies and exposing progressivism for the spent force it is.

The substantive policy agenda for such a modernized conservatism largely exists in the world of right-leaning wonks, but the politicians have been slow to embrace it. It is high time they did, not only for their party’s sake but for their country’s.

The reactionary left has little to offer the future except debt and decline. Its exhaustion threatens to become the country’s exhaustion. Only an assertive, imaginative, and entrepreneurial policy conservatism geared to applying longstanding principles to new challenges can open another path. And only that kind of path, rather than an attempt to emulate the Democrats’ supposed electoral formula, could make possible the Republican renewal that is now essential to America’s renewal.